Ultimate KPI Tree Guide: How to Build Killer KPI Trees in 7 Steps
Have you ever felt overwhelmed trying to come up with all the key performance indicators (KPIs) tied to your business or project goals? It can be challenging to connect strategic objectives to measurable progress in a meaningful way. This is where KPI Trees come in handy! They are arguably the fastest way to turn strategy into measurable outcomes.
Want to give it a go? We've got a simple KPI Tree template waiting for you below - and it's free!
Intro to KPI Trees
Ever wondered how your day-to-day work connects to those big company goals? That's exactly where the importance of KPI Trees lies. Think of them as a family tree for your measures - showing how everything links together, from the top-level stuff right down to the nitty-gritty.
What is a KPI Tree exactly? Don't worry - in this guide, we'll walk you through it (in plain English), show you a real example, and help you build one from scratch. No fancy business speak, just practical stuff you can actually use.
Defining KPI Trees
The official KPI Tree definition: a simple, visual hierarchy to show how an organisation's big-picture goals break down into day-to-day results you can measure and track. KPI Trees also allow you to visualise complex relationships, conflicts and interdependencies within an organisation.
The KPI Tree method of designing key performance indicators was invented by Bernie Smith in 2011 and first appeared in his book, KPI Checklists (published 2013). They expand on the concept of driver trees (from P-M Analysis, part of the Toyota Product System) and the Strategy Maps approach developed by Kaplan and Norton.
The KPI Tree approach and notation was specifically created to be a quick and easy way to spot exactly which KPIs your business needs.
5 Powerful Benefits of KPI Trees
KPI Trees are all about breaking down vague aspirational goals into meaningful metrics. Here are five powerful benefits they provide:
- Sum up a complex situation with just a few markers: With the KPI Tree you naturally arrange target KPIs into meaningful groups, in a clear hierarchy. Want to get an overall score? Just decide how important each bit is and do some basic maths.
- Get everyone on the same page: Every client Bernie has worked with has featured a dominant character in the group. This character can bounce a group into a particular set of measures through a mixture of rational argument and strength of will (in other words, the loudest voice wins). Developing a KPI Tree avoids this by getting everyone involved in building the measures together during a series of sessions. Anyone can chip in and question things because it's all laid out clearly and follows a framework.
- Makes explaining the approach easy: It normally takes two two-hour workshops to get a group up to speed and to successfully create a complex KPI Tree, but you can teach someone to read a KPI Tree in about five minutes. It can also become a powerful way for executives and bosses to explain their approach in terms that a group can really understand. It shows they've really thought things through.
- Keep up with changes in strategy: Businesses, markets and executive teams change. It’s absolutely guaranteed that, if you are lucky enough to have a good roadmap, it will have to change - possibly very soon. Using the KPI Tree approach means that you can see what impact changes in the roadmap will have on your measures.
- Understand how measures interact: You can have too much of a good thing. It’s especially true in the world of measures. Measures can often be driven by mutually exclusive goals. By pushing a ‘good’ measure too far you can unexpectedly have a negative impact on your ultimate strategic objective.
All this means you choose meaningful and productive KPIs that improve data-driven decision-making. If you don't use an approach like this, then your KPIs are normally the measures that the biggest personality in the room wanted.
KPI Tree Visualisation
The basic KPI Tree structure design has four levels, and we use different colours to make the KPI Tree visualisation dead easy to follow.
At Made to Measure KPIs, we use green for the Strategic level, orange for Theme level, purple for Tactical level and blue for the various KPIs driving end results (the ones we'll eventually track).
Here's a KPI Tree diagram example Bernie developed for training purposes. This KPI Tree structure is fully fleshed-out for the goal most people relate to: "Be Healthy." It shows you a proper KPI Tree structure design with four distinct levels from strategy to specific measures, making the KPI Tree depiction really clear and easy to understand.
KPI Tree vs Metrics Tree: What's the Difference?
Let's break this down in simple terms - while they might sound similar, KPI Trees and metrics trees do different jobs. Here's how:
What they're for:
- KPI Trees show how well you're doing at hitting your big business goals
- Metrics trees track how your day-to-day work is flowing (using what we call a metrics tree model)
How they're built:
- KPI Trees start with the big picture at the top and work down
- A metrics tree starts with the ground-level stuff and builds up based on workflows
What they measure:
- KPI Trees look at whether you're getting the strategic outcomes/results you want
- The metrics tree checks if your everyday activities are running smoothly
When to use them:
- KPI Trees help bosses make big decisions about where to focus resources
- Metrics trees help teams spot where to make their work more efficient
In summary, KPI Trees help you achieve your mission, while the metrics tree model helps you run things better. Most organisations actually use both - KPI Trees for the big picture stuff, and metrics trees for keeping an eye on the day-to-day operations.
KPI Tree Explanation in 3 Minutes
Grab a cuppa - in just three minutes, this video will walk you through everything you need to know about KPI Trees. It's a proper KPI Tree explanation that keeps things simple and practical.
Implementing KPI Trees
Ready to turn your KPI Tree design into something real? Let me show you how to build one step by step. Constructing a KPI Tree isn't rocket science - we'll start at the top with what you want to achieve, then break it down into bits you can actually measure. This guide to implementing KPI Trees will help you create something that really works for checking how well you're doing.
Want to build your KPI Tree on your computer? You'll need some tools for that. Once you've gone through the steps below, We can show you what's available - from KPI Tree drawing tools with free stuff you can use straight away to ready-made templates in our KPI Tree Store that do the hard work for you.
How to Build a Killer KPI Tree in 7 Easy Steps
Creating a KPI Tree diagram might seem a bit daunting at first, but don't worry - here's how to build a KPI Tree step by step.
Typical time to draft a KPI Tree: 2 hours
Things you will need
ROKS KPI Tree Method
Step 1
State your long-term goals
Start with the basics - what are you trying to achieve? Review any existing mission, vision and senior approach documents to find your company's goals and then boil them down into simple, clear, single-phrase sentences that anyone could understand.
This is the Strategic level (green boxes).
Step 2
Chunk - Break down your high-level goals into smaller results and outcomes
Now take those big goals from Step 1 and split them into smaller chunks, one big goal at a time. This is the Theme level (orange boxes).
Let's use "Be healthy" as an example of a big goal. What affects that? Things like:
- Good quality, regular sleep
- Diet
- Aerobic fitness
- Body weight
- Stress levels
- Managing/eliminating unhealthy habits
All of those things make up the 'Chunks' (or drivers) for the big goal of "Be healthy".
Step 3
Chat - Tune the wording of your tree
One or two words aren't enough - they're too vague and can be easily misunderstood by others. Use 5-10 words to really spell out what you mean for each Chunk. Here is a handy guide for how to write goal statements - use our three basic steps to perfectly describe your drivers (Chunks).
Step 4
Check - Look out for common mistakes and issues with KPI Trees
Watch out for these traps:
- Using department names instead of what they actually do (say "We recruit appropriately skilled people" not just "HR")
- Including targets and numbers in the description. This can be highly emotive. Targets should only be set once a KPI has been agreed as being important (shortlisting), i.e. not during the KPI Tree build process
- Using woolly words like "world-class" or "brilliant" - these sound great but are actually vague and difficult to define, making assembling KPI Trees much harder
Make sure to avoid these common mistakes and aim to use rich, specific and descriptive language.
Step 5
Connect - Use connectors to show relationships and interactions
Boxes on the KPI Tree can be linked to any other to show a relationship. There are two main link types...
Link type 1 - Cause and effect
Where one activity directly influences another. This the most common type of relationship, so we use a plain grey line for this.
Link type 2 - Conflict
Where one activity conflicts with another. Use a red line to show this. A red link often indicates mutually exclusive end results.
Step 6
Repeat Chunk, Chat, Check, Connect Process for next layer
Go through steps 2-5 again for each orange box (Theme level), creating purple boxes (Tactical level) underneath.
Step 7
Identify KPIs for lowest-level end results on tree
By the time we get to the Tactical (purple) level, it should be very easy to identify relevant KPIs at the final level below that (blue boxes).
For example, if you're looking at "Manage calorie intake", you might measure:
- Body Mass Index
- Weight
- Alcohol intake
Repeat these steps until you have filled out your whole KPI Tree.
The beauty of this? You end up with all your possible KPIs laid out clearly. Then you can use Bernie's Shortlisting method to pick out the ones that really matter.
Watch our free webinar on 'How to Build a KPI Tree' now!
A 40 minute session covering...
- What KPI Trees are and when to use them
- Demonstration, assembling a real-world KPI Tree
- Five tips on getting the most from your KPI Trees
The session will include useful free downloads and a brilliant offer on Bernie's KPI Tree Starter Pack, which includes powerful cheat-sheets and completed KPI Tree examples.
KPI Tree Examples and Templates
Let's show you a real KPI Tree example that puts all seven steps into action. We've taken a slice from a financial KPI Tree template Bernie built that focuses on profit. Want the full version with all the solvency bits? Just pop your email in below and we'll send it to you.
Need more examples? Check out our blog - it's packed with free KPI Tree samples covering everything from finance to service improvement and product quality. You'll find Excel files with a simple KPI Tree template format to help you get going.
And if you want something ready to use straight away, pop over to our KPI Tree store. We've got loads of pre-built KPI Tree diagram template formats ready to go. Oh, and here's a bonus - grab our complete financial KPI Tree template in Excel, free!
Where Can You Use KPI Trees?
Here's the brilliant thing about KPI Trees - as long as you can clearly spell out the end result you want, you can use them for pretty much anything. Want to manage products better? Check. Looking to boost innovation? Perfect. Starting a new business? Absolutely.
They're fantastic at making sure everyone's pulling in the same direction, from the top brass right down to the shop floor. Need some ideas? Our KPI Tree store is full of ready-made packs that'll save you loads of time and give you tons of inspiration.
KPI Tree FAQs
The main challenge with KPI Trees is that they can rapidly generate a very long list of relevant potential performance measures. This is why KPI Trees design process is followed by the Shortlisting step in the ROKS method. The Shortlisting step allows the most important and practical candidate measures to be identified in a systematic way.
KPI Trees were invented in 2011 by Bernie Smith. They were first described in KPI Checklists in 2013. They expand on the concept of driver trees (from P-M Analysis, part of the Toyota Product System) and the Strategy Maps approach developed by Kaplan and Norton. The KPI Tree approach and notation has been organised to specifically assist in identifying all the KPIs that an organisation should consider, quickly and simply.
Sometimes it is hard to tell whether the specific value of a certain important KPI is good or bad. For instance, if 54% of our staff ticked the 'Very happy' box in response to 'How happy are you in your job?', is this a good or bad figure? You could benchmark against other organisations, but that brings in a whole host of other variables.
Alternatively, we can safely say that a score of 40% would be a drop in performance and 65% would represent a significant improvement. This would make this key performance indictor 'directional'. We don't have an absolute reference point, but it can still be useful.
Making a KPI Tree template is tricky because each aspirational aim can have varying amounts of catalysts and key performance indicators. However, we understand that many businesses will have overlapping factors and similar traits resulting in similar core KPIs. You can get access to our complete ready-to-use KPI Tree library by clicking here.
So, now you're up to speed on what a KPI Tree is and how powerful they can be when you use them. Want to use KPI Trees with your team? Let us show you how to run a proper KPI Tree Workshop.
We've broken it down into simple checklists that really work:
KPI Tree Workshop Checklist 1 - Preparation checklist
- Become fully familiar with the executive approach of your organisation.
- Become fully familiar with the aspirational aims of your organisation.
- Double-check those aims with all engaged senior stakeholders - if there are differences then they must be ironed out before the sessions.
- Check that there are between two and seven executive goals - if there are more than this, it is likely that lower-level tactical objectives are in the mix.
- Gain support and approval to hold a session from senior stakeholder(s).
- Pull together some prototype outputs from previous sessions (or use the illustrations included in this book).
- Gather your stakeholders together in groups.
- Select groups of between three and nine people per session (certainly no more than twelve).
- Select group to have a good mix of seniority.
- Organise two two-hour long workshop sessions, separated by between one and five working days.
KPI Tree Workshop Checklist 2 - Practicalities checklist
- Book meeting rooms for both sessions.
- Draft briefing email and send out invitations.
- Base group selection around broadly similar remits.
- Make sure there are desks available for them to work at.
- Ensure a whiteboard is available, if possible.
- Print out samples and worksheets.
- Take Post-Its and pens to the session. A camera phone can also be useful.
KPI Tree Workshop Checklist 3 - The first session checklist
- Explain the approach.
- Identify the executive objectives - agree these with the group.
- Give the background to the session.
- Show a finished prototype.
- Get the group to do an elementary (non-work) exercise example.
- Explain the three link types: cause-effect, conflict and companion.
- Help the group work through a more complex non-work scenario, including link types.
- Get the group to develop a draft KPI Tree specific to the group's relevant organisational mission-focused objectives.
- Develop one tree per objective. The trees will almost certainly cross-link so it makes sense to develop them using one large sheet if possible.
Quick tip: If people start worrying about too many measures, remind them that the whole point of a KPI Tree is to generate a list of all potential measures - there is a subsequent step that follows a KPI Tree called Shortlisting that will help your team pick out only the most important KPIs to actually track.
- Write up the Trees from all groups and merge into one tree.
- Add notes to show where decisions have had to be made on the merge.
KPI Tree Workshop Checklist 4 - The second session checklist
- Review the merged tree.
- Are there important factors that will not register with any of the measures identified? If so, then you have missed something out of your tree.
- Is there a way of making a measure go the 'right' way, but by doing something stupid?
- Add any further branches that need adding.
- Make corrections and discuss the merged tree.
The second session is normally quite straightforward as the group will be fresh, familiar with the purpose of the session and used to working as a group.
- Finish drawing up the trees from the second session (there may be several trees, but there should be only one version for each objective, the various versions having been merged after the first session).
- Add explanatory notes as needed.
- Circulate to the participants for final approval. State that the absence of a response will be taken as implicit approval.
Tools for Assembling KPI Trees
There are several choices for drawing illustrations. Key points you need to consider when choosing one are:
- Does the read/edit software have to be a standard desktop application (like Microsoft Word or PowerPoint) or do you have the chance to install specialist applications like Visio or Aris?
- What is the IT skill level of the users?
- Do you have to attach meta-data to objects? If so, you will need to go for a more specialist rendering package e.g. Visio.
- Is there a company standard currently in use for this type of graphical display? E.g. Mindjet, mind mapping software.
- Will the software be used on a variety of operating systems? Some applications like OpenOffice, Freemind and Mindjet cover two or more operating systems. Others, such as Visio, tie you firmly to one platform.
- What level of annotation and general sophistication are you looking for? How many nodes/branches do you need to fit in?
We have an entire guide dedicated to breaking down the different KPI Tree drawing tools and options available to you, which include free resources as well as our done-for-you templates at our KPI Tree Store.
For more practical, straight-talking advice on KPI Trees and choosing the best KPIs, check out Bernie's book KPI Checklists
I’ve Built My KPI Tree – What’s Next?
Great work getting your KPI Tree together! But that’s just one step in the ROKS method (Results-Oriented KPI System). Your KPI Tree gives you a longlist of potential KPIs – now let’s take it to the next level.
Here’s what to do next:
Follow the ROKS Approach
Want the full picture? We’ve got you covered with:
- An explainer, showing all steps of the ROKS method
- Links to resources for each step of the ROKS method along with some helpful videos from our KPI Academy courses
But if you’re itching to dive in, here are the key steps after building your KPI Tree:
- Shortlist Your KPIs
Go through your KPI Tree and pick the KPIs that matter most. Focus on importance and ease of measurement. - Define Your Shortlisted KPIs
Use the ROKS KPI Definition Canvas to properly define and refine each KPI. Need help explaining it to your team? Grab our KPI Cheat Sheet – it’s perfect for onboarding new joiners and getting everyone on the same page. - Draft Dashboards and Reports
Start sketching out how you’ll present your data. Think about what your team needs to see, and make it easy to understand at a glance. - Go Live
Roll out your KPIs, dashboards, and reports. This is where all your hard work pays off – your new system is ready to drive results!
Getting Buy-In for Your New KPIs
Getting buy-in starts well before you begin building your KPI Tree. Check out our blog post covering How to Get Staff Buy-In for KPIs in 5 Steps.
Once you've got a KPI Tree built, here’s a smart way to spot any gaps and get people on board even further:
Ask your team this question:
"Thinking about the last few problems that hit your desk, where would they show up on this Tree?"
If your Tree’s well-designed, every issue should show up on at least one metric. If it doesn’t, you might’ve missed a branch or two – go back and tweak your Tree.
Remember: KPIs won’t solve problems for you, but they should light up when problems happen so you can take action.
Need a KPI Tree Head Start?
Good news: Many organisations share similar KPI needs. Financial, operational, and HR KPIs, for instance, often look pretty similar across businesses.
That’s why Bernie has built 52 foundation KPI Trees, based on common traits across organisations. Even better, we’ve narrowed it down to the 13 most popular packs, each including:
- Pre-built KPI Trees
- Supporting templates
- Fully defined KPIs ready to print and use
Want to save time? Grab one of these packs and hit the ground running.
Need Help Formulating Your KPI Trees?
Bernie regularly helps clients produce custom KPI Trees. This can be done remotely or on-site. Get in touch using the form below for a free initial chat about your needs.
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